Opening New Frontiers

Transcription

1 Opening New Frontiers 2 nd QUARTER 2011 RESULTS REGULATED INFORMATION

2 SOLVAY GROUP 2 nd QUARTER BUSINESS REVIEW Excellent operating result in the 2 nd quarter of 2011: REBITDA (EUR 304 million) up by 12% compared to the 2 nd quarter of 2010 Increase in sales volume (+4%) reflecting very sustained overall global activity Higher sales prices (+11%) compensating for rise in energy costs Operating margin - REBITDA on sales stable at 18% Net result of EUR 111 million, greatly improved from last year Launch of a friendly cash offer for Rhodia on June 15, 2011 Quote of the CEO The 2 nd quarter of 2011 has been excellent for Solvay with demand supporting volume growth of 4% while we achieved prices 11% ahead of the same period last year. Taken together this led to REBITDA and REBIT from continuing operations up by 12% and 27% respectively. We continue to trade in line with our expectations. Outlook The Solvay Group is attentive to the macro-economic developments and the evolution of the energy and ethylene costs. In the context of the current business climate and based on its strategy of sustainable and profitable growth, Solvay expects to improve its annual operating result, both in Chemical and Plastic activities in Friendly cash offer for Rhodia ongoing Solvay s friendly cash offer for Rhodia shares was launched on June 15 th The aim is to create with Rhodia a large global chemical company, committed to sustainable development. The New Solvay will capitalize on its geographic diversification, the quality and balance of its portfolio of activities, its industrial excellence and the solidity of its financial base to fully capture new growth opportunities, especially in high-growth markets. The closing date for the offer will be published by the Autorité française des marchés financiers following receipt of approval from the European Commission which is expected on August 5,

3 SOLVAY GROUP 2 nd QUARTER BUSINESS REVIEW Key data (in million EUR) 1 2 nd quarter 1 st semester Change % Change % Sales from continuing operations % % Sales growth excluding forex and scope 16% 18% REBITDA from continuing operations % % REBITDA as a % of sales 18% 18% 17% 16% REBIT from continuing operations % % Result from discontinued operations Net income (Solvay share) % ns Basic earnings per share from continuing % % operations 5 Cash flow from operating activities from continuing operations Cash flow from investing activities from continuing operations Financial data for the year 2010 were restated to take into account the following change: since January 1, 2011, the Group consolidates joint ventures using the equity instead of the proportionate (in line with IAS 31) with a negative impact on the sales of the 2 nd quarter 2010 of EUR 308 million and on the sales of the 1 st semester 2010 of EUR 552 million. More information about this is provided on pages 16 and 17 of this press release. 2. REBITDA: REBIT, before recurring depreciation and amortization 3. REBIT: measure of operating performance (this is not an IFRS concept as such) 4. Data from the results of the pharmaceuticals activities up to February 15, 2010 in the Group accounts are consolidated under a single heading in the income statement: Result from discontinued operations. 5. Calculated on the basis of the weighted average number of shares in the period, after deduction of treasury shares and own shares purchased to cover the stock option program, or a total of shares at the end of June 2010 and shares at the end of June Compared with 2 nd quarter 2010 Sales REBITDA Net income million + 12% 304 million + 12% 111 million -3-

4 SOLVAY GROUP YEAR-TO-DATE BUSINESS REVIEW (JANUARY - JUNE) Key data (in million EUR) 6 months Change % Sales % Plastics % Chemicals % REBITDA % Plastics % Chemicals % New Business Development % Corporate and Business Support % REBIT % Plastics % Chemicals % New Business Development % Corporate and Business Support % 1. Following the implementation of the new organization, an amount of EUR 120 million of sales was transferred from the Chemicals Sector to the Plastics Sector in the figures of the 1 st half of 2010, without hardly any impact on the results. Business review 6 months 2011 Sales amounted to EUR million, up by 17%. This improvement was reflected in both Plastics and Chemicals. The growth in sales volume amounted to 7%; it was sustained by strong demand in most activities. The dynamic economies in Asia and South America enabled Solvay to record 26% of its sales there in the first half of the year. This context of sustained activity resulted in an average increase in sales prices of 11%. REBITDA amounted to EUR 589 million, up by 26%. The margin - REBITDA on sales - was 17%, up compared to the first half of 2010 (16%). This improvement was explained by sustained capacity utilization rates and by higher sales prices than last year, which compensated overall for the rise in energy costs and some raw materials. It should be recalled that integration of the Group in its primary raw materials is a significant competitive advantage in the current context of input cost increases. The very good operating performance of Specialty Polymers was of particular note. REBIT amounted to EUR 416 million, up by 47%. REBIT of the New Business Development segment amounted to EUR -14 million; it was composed primarily of research efforts undertaken in promising and important areas for the development of the Group, outside of its traditional activities. The REBIT of the Corporate and Business Support segment amounted to EUR -27 million; it is impacted by orphan costs following the sale of the pharmaceutical activities. Factors influencing sales (% of 1H10 sales) New Business Development: +11% -1% +0% +17% Solvay announced on July 26 th 2011 to commit EUR 10 million to support Plextronics innovative technology development in organic light emitting diodes and photovoltaics +7% Volume Price Exchange Scope Total -4-

5 PLASTICS 2 nd QUARTER BUSINESS REVIEW Strong overall activity level in the 2 nd quarter Margin - REBITDA on sales - record in Specialty Polymers: 30% Strong progress in operating result for Vinyls in the three regions Key data 1 (in million EUR) 2 nd quarter 1 st semester 2011 Change in % 2011 Change in % Sales % % Specialty Polymers 325 7% % Vinyls % % Vinyls Europe % % Vinyls Asia 93 17% % Vinyls South America % % Plastics Integration 49 15% 96 16% REBITDA % % Specialty Polymers 98 21% % Vinyls 99 52% % REBIT % % Specialty Polymers 78 26% % Vinyls % % 1. The 2010 Plastics Sector figures include the results from the first 6 months of 2010 for Inergy Automotive Systems Compared with 2 nd quarter 2010 Sales 989 million + 13% REBITDA 197 million + 22% -5-

6 Specialty Polymers Specialty Polymers continued to benefit from very strong demand in the 2 nd quarter of The growth in sales volumes, the improvement in product mix thanks to development of new applications with higher added value and the gradual rise in sales prices explained the increase in sales (+7%) compared to the 2 nd quarter of last year. In order to handle this very strong demand, Solvay has undertaken significant efforts to increase production at its existing installations (through debottlenecking) and to build new ones, in particular in Asia. Today, Solvay already realizes about 30% of its sales of Specialty Polymers in this region. REBITDA amounted to EUR 98 million, up by 21% compared to the 2 nd quarter of The margin REBITDA on sales amounted to 30% compared to 27% in the 2 nd quarter of The growth in sales volumes, the better product mix and rising prices explained the excellent profitability of this branch of activity. Research and development is one of the key strategic focus points of Solvay Specialty Polymers. It should be noted in this regard that the portfolio of applications in development is very promising; it includes more than 1300 active projects and should generate 30% of additional sales during the next three years. Vinyls Sales for Vinyls amounted to EUR 665 million, up by 16% compared to the 2 nd quarter of This improvement was reflected across the three regions of the world in which Solvay has a presence. It is explained by the overall higher level of sales prices of PVC and caustic soda in a context of continued sustained activity in Asia and South America and of recovering demand in Northern Europe. The construction sector remained sluggish in the countries of Southern Europe. REBITDA amounted to EUR 99 million, up by 52% compared to the 2 nd quarter of The margin REBITDA on sales amounted to 15%. The improvement in the operating result was seen at SolVin (Vinyls Europe) as well as Solvay Indupa (Vinyls South America) and Vinythai (Vinyls Asia). It was explained by high capacity utilization rates in a context of overall sustained demand and by margins on ethylene and caustic soda higher than in the 2 nd quarter of last year, seen in each of the three regions. It should be noted that in South America, a spot item weighed on results in May for Solvay Indupa: the shutdown for a planned turnaround of the production unit located in Brazil. The unit located in Argentina will be shutdown for maintenance in the 3 rd quarter. Factors influencing sales (% of 2Q10 sales) +17% -3% Factors influencing sales (% of 2Q10 sales) +0% +16% +5% -6% +7% +1% +7% +1% Volume Price Exchange Scope Total Volume Price Exchange Scope Total Solvay to build large specialty polymers production plant in China to continue serving fast growing demand The plant at Solvay s industrial site in Changshu, scheduled to become operational begin 2014, requires an investment of EUR 120 million It will significantly boost Solvay s global production capacity for these specialty polymers (SOLEF PVDF, TECNOFLON FKM and VF2) and bring performing solutions to automotive, oil & gas, energy, chemical, semi-conductor industry, Li-Ion batteries and membranes for water purification markets. -6-

7 CHEMICALS 2 nd QUARTER BUSINESS REVIEW Sales volumes sustained across all activities Higher sales prices more than compensate for the impact of the rise in energy costs Margin - REBITDA on sales: 17% Key data (in million EUR) 2 nd quarter 1 st semester 2011 Change in % 2011 Change in % Sales % % Essential Chemicals % % EMEA % % North America % 230-8% South America 35 59% 68 77% Asia Pacific 47 26% 99 51% Special Chemicals 167 9% % REBITDA 127 6% % Essential Chemicals 101 6% % Special Chemicals 26 8% 49 34% REBIT 90 25% % Essential Chemicals 72 15% % Special Chemicals % % 1. Soda ash exports from the USA no longer go through ANSAC but are directly handled by Solvay since January 1, This largely explains the sales drop in North America and the higher sales in Asia and South America. 2. Europe, Middle-East and Africa Compared with 2 nd quarter 2010 Sales 730 million + 10% REBITDA 127 million + 6% -7-

8 Essential Chemicals Sales amounted to EUR 562 million, up by 10% compared to the 2 nd quarter of In soda ash, sales volumes were higher than those from last year due to the sustained demand in the container glass and detergents sectors and the continued recovery of the flat glass sector. The latter continues to be impacted in the countries of Southern Europe and in the United States, however, due to weak activity levels in construction. Asian and South American demand for soda ash remained very sustained, which explained the high level of exports. Sales volumes of bicarbonate continued to improve, especially for environmental and medical applications. Aside from sales volumes, the increase in sales of soda ash and its derivatives was explained by higher sales prices, in particular in Europe and in exports. Caustic soda benefitted from stable sales prices, clearly higher than last year in a context of continued sustained demand. The improvement in sales of epichlorohydrin was explained by the increase in both prices and sales volumes. World demand for epoxy resins, made with an epichlorohydrin base, increased significantly in the 1 st half. In hydrogen peroxide, sales were higher than the already high levels reached in the 2 nd quarter of last year. Sales volumes continued to be sustained in all regions by strong demand in paper pulp, especially from Asia. The other markets, especially the chemical industry, environmental applications and aseptic packaging, also continued to perform well. This positive context in terms of demand resulted in a gradual increase in sales prices. REBITDA amounted to EUR 101 million, up by 6%. The margin REBITDA on sales amounted to 18%. It was only slightly inferior to that of the 2 nd quarter of 2010 (19%) despite the significant rise in costs of energy (coke, steam, electricity) and some raw materials (propylene, hydrogen). The rise in prices and increased sales compensated for the increased input costs. Special Chemicals Sales amounted to EUR 167 million, up by 9%. This improvement came primarily from fluorinated chemicals that performed very well compared to the other activities in this segment. They benefited from a growth in demand across all products and market segments (automotive, agro-solutions, pharmaceutical applications, refrigeration) and increased sales prices. REBITDA amounted to EUR 26 million, up by 8%. The increase in variable costs could be compensated for by an increase in prices and sales. It should be noted that the integration of Solvay upstream, up to extraction of fluorspar, proved to be of particular benefit in the fluorinated chemicals activity. Special Chemicals Factors influencing sales (% of 2Q10 sales) +6% Volume Price Exchange Scope Total Essential Chemicals Factors influencing sales (% of 2Q10 sales) +6% +6% -4% +10% -5% +0% +9% +0% +10% Volume Price Exchange Scope Total Ongoing startup of a second mega plant for hydrogen peroxide of 330kt/year for the production of propylene oxide The use of hydrogen peroxide for propylene oxide production the HPPO process is a new application of this product which is significantly transforming this industry. Solvay is the leader of this new market in partnership with BASF and Dow Chemical Company. -8-

9 CONSOLIDATED FINANCIAL STATEMENTS INCOME STATEMENT Million EUR (except for per-share figures in EUR) 2 nd quarter 1 st semester Sales Combined sales Cost of goods sold Gross margin Commercial and administrative costs Research and development costs Other operating gains and losses Earnings from associates and joint ventures accounted for using the equity REBITDA REBIT Non-recurring items EBIT Cost of borrowings Interest on lendings and short-term deposits Other gains and losses on net indebtedness Cost of discounting provisions Income/loss from available-for-sale investments Result before taxes Income taxes Result from continuing operations Result from discontinued operations Net income Non-controlling interests Net income Solvay share Basic earnings per share from continuing operations Basic earnings per share from discontinued operations Basic earnings per share Diluted earnings per share from continuing operations Diluted earnings per share from discontinued operations Diluted earnings per share Combined sales corresponding to sales of consolidated companies plus Solvay s share of sales of joint ventures and associates after intercompany elimination is provided for information purposes to facilitate the transition to the new accounting for joint ventures using the equity since January 2011 (see p16). -9-

10 INCOME STATEMENT Additional comments on the income statement of the 1 st half of 2011 Non-recurring items amounted to EUR -1 million. Following the decision by the European General Court to reduce the fine imposed on Solvay in 2006 by the European Commission for violations of competition rules in the peroxide market, there was a partial reversal of the existing provision by EUR 24 million. Solvay has decided to appeal this ruling. Charges on net indebtedness amounted to EUR -81 million. The charges on borrowings amounted to EUR -71 million. Gross financial debt (EUR million) was covered at 83% at an average fixed rate of 5.1% with a duration of 4.7 years. Interest on cash deposits and investments amounted to EUR 20 million. It should be recalled that proceeds from the sale of the pharmaceuticals activities have been invested in short-duration government bonds and highest-rated treasury instruments. The cost of discounting provisions amounted to EUR -24 million. Income taxes amounted to EUR -62 million. The effective tax rate at the end of June 2011 was 21%. Net income amounted to EUR 230 million. The negative contribution of discontinued operations of EUR -44 million was explained primarily by the post-closing adjustment of EUR -47 million related to working capital following the sale of the pharmaceuticals activities. Net income Solvay share amounted to EUR 197 million. STATEMENT OF COMPREHENSIVE INCOME Million EUR 2 nd quarter 1 st semester Net income Gains and losses on available-for-sale financial assets Gains and losses on hedging instruments in a cash flow hedge Currency translation differences Share of other comprehensive income of associates and joint ventures accounted for using the equity Income tax relating to components of other comprehensive income Other comprehensive income, net of related tax effects Comprehensive income attributed to owners of the parent non-controlling interests

11 STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) Million EUR June 31, 2011 December 31, 2010 Non-current assets Intangible assets Goodwill Tangible assets Available-for-sale investments Investments in joint ventures and associates equity Other investments Deferred tax assets Loans and other non-current assets Current assets Inventories Trade receivables Income tax receivables Dividends receivable 8 1 Other current receivables - Financial instruments Other current receivables Other Cash and cash equivalents TOTAL ASSETS Total equity Share capital Reserves Non-controlling interests Non-current liabilities Long-term provisions: employees benefits Other long-term provisions Deferred tax liabilities Long-term financial debt Other non-current liabilities Current liabilities Short-term provisions: employees benefits Other short-term provisions Short-term financial debt Trade liabilities Income tax payable Dividends payable Other current liabilities TOTAL EQUITY & LIABILITIES

12 STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of the parent Million EUR Share capital Issue premiums Retained earnings Treasury shares Currency translation differences Fair value differences- Available for sale investments Fair value differencescash flow hedges Total Non-controlling interests Total equity Balance 31/12/ Net profit for the period Other elements of the comprehensive income Comprehensive income Cost of stock options Dividends Acquisition/sale of treasury shares Issure of share capital 0 0 Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control Other Balance 30/6/

13 CASH FLOW STATEMENT Million EUR 2 nd quarter 1 st semester EBIT Depreciation, amortization and impairments Changes in working capital Changes in provisions Income taxes paid Others Cash flow from operating activities Acquisition (-) of subsidiaries Acquisition (-) of investments - Others Sale (+) of subsidiaries Sale (+) of investments Others Acquisition (-) of tangible and intangible assets Sale (+) of tangible and intangible assets Income from available-for-sale investments Changes in non-current financial assets Other Cash flow from investing activities Capital increase (+) / redemption (-) Acquisition (-) / sale (+) of treasury shares Changes in borrowings Changes in other current financial assets Cost of borrowings Interest on lendings and short-term deposits Other Dividends received from associates and joint ventures accounted for using the equity Dividends paid Cash flow from financing activities Net change in cash and cash equivalents Currency translation differences Opening cash balance Closing cash balance Free Cash Flow 1 from continuing operations Free Cash Flow 1 from discontinued operations Free Cash Flow = cash flow from operating activities + cash flow from investing activities -13-

14 CASH FLOW FROM DISCONTINUED OPERATIONS Million EUR 2 nd quarter 1 st semester Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash and cash equivalents Additional comments on the cash flow statement of the 1 st semester 2011: Cash flow from operating activities amounted to EUR 103 million compared to EUR 61 million in the first half of This improvement derived mainly from the growth in operating result. Depreciation and amortization of assets amounted to EUR 176 million compared to EUR 222 million in the first half of This difference was explained primarily by the impairment of industrial assets recorded last year in the hydrogen peroxide and fluorinated chemicals activities. Working capital increased by EUR 294 million compared to the end of December 2010, to EUR million. It should be noted that the increase in industrial working capital (+10% compared to the end of June 2010) was significantly lower than the growth in sales (+17%). Cash flow from investing activities amounted to EUR -236 million. Aside from health, safety and the environment as well as maintenance of industrial assets, the investments involved a limited number of strategic projects oriented in priority to geographic expansion and to the choices made in terms of sustainable development. The most material investment in the first half of 2011 involved an increase in capital of EUR 106 million in RusVinyl (partnership between SolVin and Sibur for construction of a PVC plant in Russia). The resulting Free Cash Flow of the 1 st half 2011 amounted to EUR -133 million. -14-

15 RESULTS BY SEGMENT BEFORE ELIMINATION OF INTER-COMPANY SALES Million EUR 2 nd quarter 1 st semester Sales Plastics Sales Inter-segment sales External sales Chemicals Sales Inter-segment sales External sales REBITDA Plastics Chemicals New Business Development Corporate and Business Support REBIT Plastics Chemicals New Business Development Corporate and Business Support EBIT Plastics Chemicals New Business Development Corporate and Business Support

16 NOTES TO THE ACCOUNTS: 1. Consolidated financial statements The consolidated financial statements were prepared in conformity with IFRS standards as currently adopted in the European Union. The same accounting policies have been implemented as for the latest annual financial statements, except for the elements developed in the note 3 below. The primary variations in perimeter between the first half of 2010 and the first half of 2011 involve: The sale of the pharmaceuticals activities on February 15, The reintroduction, during the second quarter of 2010, in the Chemicals sector of the assets and liabilities linked to the precipitated calcium carbonate activity, following the decision to terminate the sale process for this activity. The sale of Inergy Automotive Systems on July 1, Limited review by the auditor Deloitte conducted a limited review of the consolidated half-year situation closed on June 30, This review consisted primarily of analysis, comparison and discussion of financial information and was thus less extensive than a review designed for a full audit of the annual books. This review revealed no items that would imply significant correction to the intermediate situation. 3. Change in accounting policy Since January 1, 2011, the Solvay Group has consolidated its joint ventures by the equity and no longer by the proportionate (in line with IAS 31). Nature of change in accounting policy Consolidation by the equity leads to recognize in the consolidated accounts only the Group share of: The joint ventures equity for the statement of financial position (balance sheet); The joint ventures net income at the level of the income statement (included in the Group REBIT); The cash inflows and outflows between the joint ventures and the fully consolidated subsidiaries (primarily the dividends paid by the joint ventures and the investments in the joint ventures) at the level of the cash flow statement. The net financial situation of the joint ventures will no longer be reported. The following tables summarize the impact of this modification of the accounting : a) On the income statement and the total comprehensive income: 1 st semester of st semester of 2010 Continuing Operations 1 Continuing Operations 1 Million EUR Equity Proportionate Equity Proportionate Sales Gross Margin REBIT EBIT Result before taxes Net income Net income Solvay share Other comprehensive income Comprehensive income No subsidiary is consolidated by the equity in Discontinued Operations. -16-

17 b) On the cash flow statement: 1 st semester of st semester of 2010 Continuing Operations 1 Continuing Operations 1 Million EUR Equity Proportionate Equity Proportionate Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities No subsidiary is consolidated by the equity in Discontinued Operations. c) On the statement of financial position (balance sheet): 30/06/ /12/ /12/2009 Million EUR Equity Proportionate Equity Proportionate Equity Proportionate Non-current assets Current assets including: Assets held for sale Pharma Assets held for sale Other Total assets Total equity Non-current liabilities Current liabilities including: Liabilities associated with assets held for sale - Pharma Liabilities associated with assets held for sale - Other Total equity & liabilities Reasons for applying the new accounting policy a. The new IFRS 11 requiring the application of the equity for joint ventures was published in May 2011, with mandatory compliance as from b. The implementation of the new organizational structure (Horizon) and the repositioning of the Group will lead to significant changes in the financial statements. It is preferable to enact all changes in 2011, including consolidation of the joint ventures by the equity, and in this way, avoid further modifications in financial reporting when the new IFRS 11 will be adopted. -17-

18 4. Content This results report contains regulated information and is established in compliance with IAS 34. A risk analysis is included in the annual report, which is available on 5. Primary exchange rates Closing Average 1 Euro = 6 months months months months Pound Sterling GBP American Dollar USD Argentine Peso ARS Brazilian Real BRL Thai Baht THB Japanese Yen JPY Solvay shares 6 months months Number of shares issued at the end of the period Average number of shares for IFRS calculation of earnings per share Average number of shares for IFRS calculation of diluted income per share Declaration by responsible persons Christian Jourquin, Chairman of the Executive Committee, and Bernard de Laguiche, Chief Financial Officer, declare that to the best of their knowledge: a. the summary financial information, prepared in conformity with applicable accounting standards, reflects a faithful image of the net worth, financial situation and results of the Solvay Group; b. the intermediate report contains a faithful presentation of significant events occurring during the six first months of 2011, and their impact on the summary financial situation; c. there are no transactions with related parties. -18-

19 Key dates for investors: October 27, 2011: 3Q11results and announcement of prepayment on dividend for 2011 (payable in January 2012) (7:30 a.m.) February 16, 2012 : Annual results for 2011 (7:30 AM) For additional information: Erik De Leye Corporate Press Officer Tel: erik.deleye@solvay.com Patrick VERELST Head of Investor Relations Tel: patrick.verelst@solvay.com Solvay Investor Relations Tel investor.relations@solvay.com SOLVAY is an international industrial Group active in Chemistry. It offers a broad range of products and solutions that contribute to improving quality of life. The Group is headquartered in Brussels and employs about 14,800 people in 40 countries. In 2010, its consolidated sales amounted to 7.1 billion EUR. Solvay is listed on the NYSE Euronext at Brussels (NYSE Euronext: SOLB.BE - Bloomberg: SOLB. BB - Reuters: SOLBt.BR). Details are available at Dit verslag is ook in het Nederlands beschikbaar Ce rapport est aussi disponible en français